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Hi everyone, today I’m excited to welcome Mr. Atul Varma, a leading tax consultant in the UAE, to our Profound Podcast.  He’s the Founder and Managing Director of Bazar Accounting and Management Advisors,-providing best-in-class Accounting, Corporate Tax, VAT, HR & Payroll Outsourcing Services & Management Consulting.

(For over a decade until 2021, Mr Varma led Grant Thornton, UAE’s renowned Business Process Outsourcing Service, bringing over 20 years of experience in the outsourcing industry. He is known for his high standards of professionalism and quality, which help clients concentrate on their strategic growth. Mr. Varma has been quoted on international accounting trends, written for Accountancy Middle East Magazine, and spoken at conferences on outsourcing.)

• Mr. Varma, you have an extensive background in the outsourcing industry. With over 20 years in the industry, what key changes have you observed in the outsourcing sector, particularly in accounting and tax services, and how have these changes influenced your practice?

Yes, it’s a very good question in fact yes I do carry over 20 years of experience and I can say you UAE has developed uh since the last few years especially become a developed economy and a more matured economy by bringing introducing taxation so we see a lot of shift in tax compliances and we see businesses are required to be more tax compliant so a huge shift of demand from for outsourcing  service providers or tax service providers in this market.

• The UAE has seen significant changes in tax legislation over recent years, including the introduction of VAT and Corporate Tax. How have these changes impacted businesses in the UAE, and what should companies be aware of to remain compliant?

Yes, the companies because of this introduction of uh corporate tax and value added tax it has become very important for businesses to maintain the books of accounts and disclose the correct information to the federal tax authorities so the most important and the significant changes is what I always tell is maintain your accounts because with this the businessmen will know what is the right tax liability they have to pay and their tax position.

• In your opinion, what are the most common misconceptions about tax compliance in the UAE, especially for international businesses looking to operate here?

In my opinion the most important thing is that we have to agree to the fact that UAE is now a tax compliant country it’s no longer a tax free or tax heaven so with this what I feel with any businesses who wants to operate here should do one thing is tax planning entry Market study before coming in getting into the business to ensure that they are aware of the post licensing one of the requirement is to be tax  compliant so yes I feel businesses should focus a lot towards tax planning of getting themselves into this business knowing about double taxation treaty with other countries internationally so that they know  exactly that when they come to UAE what is expected out of them.

• You’ve written extensively about outsourcing in the Middle East. What do you believe are the main benefits for companies choosing to outsource their accounting and tax functions?

We see the benefit of Outsourcing uh accounting and tax services is the businesses can concentrate on their business which is the real reason why they’ve come in and leave all the compliances behind in the hands of specialist be it accounting specialist Tax Specialist or payroll specialist so we see that this is the biggest Advantage for the businesses and the second thing is they do not have to worry about the Ever Changing tax regulations because the books of accounts or tax filing is in the hands of tax specialist.

• How do you see the role of technology evolving in the outsourcing industry, particularly in areas like HR and payroll management?

Yes, technology plays a very important role as we see that uh you know uh many businesses would like to move away from the old methods of doing it like in Excel or word etc to a more advanced and confidential uh driven uh software especially in the HR and payroll because you know by the nature itself it’s salary information very sensitive data so we see a huge shift of demand for companies to have uh software applications and um running their payroll records all over the software and I think this is a very important thing because uh nobody would like to disclose their salaries yeah and also every company would like to be in compliance for towards it so we see a huge shift of uh movement towards technology especially on the HR and payroll.

• What are some of the most significant challenges your clients face, and how does your firm help them navigate these challenges?

So the most significant challenge which I have seen with any client is getting updates from the regulators be it the tax authorities or be it the accounting authorities or for that matter in payroll so we see they’re not educated because they’re so much focused on their business so here where we see the biggest challenge for our clients and we love to educate them advise them and say okay what they need to do to be updated with regard to what has been announced by the authorities here.

• What are some of the emerging trends or issues in the accounting and tax sectors that businesses should be aware of over the next few years?

Of course businesses should be aware of most important thing is the corporate tax which is announced last year so the very immediate thing which every businesses should focus is on the corporate tax registrations after that is of course maintaining the books of accounts then there is transfer pricing rules which will be applicable in this part of the world for most of the companies here because we see a major category of businesses here so we see those are very important things which any businesses should be taken care of so the major shift we see is yes they need to be more serious about uh being in compliant to meet the requirements here.

• Are there any upcoming projects or initiatives at Bazaar Accounting and Management Advisors that you’re particularly excited about and would like to share with our listeners?

Yes, this is a very good question in fact, yes I am very excited to announce that Bazar accounting and management advisers have opened a new Venture bam Tax Advisor LLC this is specially or to be focused on tax compliant requirements for our customers be it value added tax be it corporate tax be it transfer pricing be it filing of returns anything and everything be it double taxation relating to tax.

• Mr. Varma, can you explain the concept of the Reverse Charge Mechanism (RCM) and its implications for businesses operating in the UAE?

Yes, of course so in case of RCM I will just make it very simple for you we know that collected Always by the suppliers it is the responsibility of the suppliers but in case of RCM this responsibility shift to the recipient okay so with this what happens is for any businesses just to make sure that they are in compliance with RCM they just need to make sure that they have proper records maintained by having proper records maintained to support the RCM it is the businesses are all in compliance so the owners shift from supplier to recipients double taxation is a significant concern for many International businesses how does the UAE address.

• Double taxation is a significant concern for many international businesses. How does the UAE address double taxation issues, and what should companies be aware of?

UAE has signed over 140 double taxation treaties worldwide so this helps businesses to you know take the benefit of the double taxation treaty sign this way they are in tax compliance they can intake they need not have to be worried about eliminating taxes so and this gives businesses a big boost in doing business in UAE.

• Can you provide insights into the recent changes in corporate tax regulations in the UAE? Specifically, how should businesses prepare for potential fines related to non-compliance?

Yes, so the recent announcement which was done by the federal tax Authority was that every businesses should register for corporate tax registration so there is a timeline mentioned by The Authority based on the licenses which are issued and every businesses should register within the timeline otherwise there is a 10,000 AED fine for late registrations so this is the recent announcement from the authorities.

• There often needs to be more clarity regarding corporate tax regulations in designated versus non-designated free zones. Could you clarify the differences and implications for businesses?

First of all I would like to start and mention here is that all free zones are not designated zones however all designated zones are free zones in order for any businesses to avail the benefit of not paying the 9% corporate tax there are certain eligibility criteria which they have to meet like in terms of qualified activities you know in terms of audit of financial statements in terms of maintaining transfer pricing documents and once all these eligibility criteria achieved then yes they can apply for non- payment of 9% corporate tax and fall under the category of exempt but then this requires a detailed investigation from case to case bases.

• For Indian businesses considering expansion into the UAE, what are the key tax benefits they can expect, and how might this influence their decision to set up operations here?

My advice to any Indian businessman is that the corporate tax rate in UA is 9% compared to in India it is 30% so straightway benefit of 21% if they open their business in UA and UA is welcoming Indian businessmen here to expand their business plus UAE is connected to the world as a c location to the world.

• When forming a new company in the UAE, what are the essential factors to consider to ensure tax efficiency and compliance from the outset?

Yes, while forming a new company in the UAE uh my advice is for anybody to look into the double taxation treaty the other second most important thing is to consider the rate of corporate tax we can say that in UAE is one of the lowest corporate tax uh countries in the world with just 9% so these are very important factors for any businessman to consider while establishing their business.

• Regarding tax benefits, how does operating in a free zone compare to a mainland setup? Which option would you recommend for businesses looking to maximise tax advantages?

So here the very important thing which we always advise our clients is to understand what is the purpose of them doing business in UAE and also to do a detailed feasibility study on the business model they’re going to be working this will also cover from the tax angle as to what is the advantage of opening it in a free zone versus mainland after doing this feasibility study it will become very easy for a customer to decide whether to set up in a free zone or to set up in the mainland.

• When should businesses register for corporate tax in the UAE, and is there a cap or threshold that determines this requirement?

So here I would emphasize the point which the FD had announced they had given clarification for all businesses to register for the corporate tax based on the license issuing date or license issue month so the guidelines are very clear about the last date by which every businessman should register this is for existing companies whether they are 2 years 3 years or even 10 years old company in this country with regard to new businesses which are establishing now they have 3 months from the date of license issue to register uh delay in registration will result in a fine of 10,000.

• Which specific activities or sectors are exempt from corporate tax in the UAE? How can businesses determine if their operations qualify for these exemptions?

Yes, the FDA has announced certain list of activities which are exempt from uh corporate tax they are like ownership and operation of ships headquarter services to related parties holding of shares logistic services reinsurance Services activities ancillaries to the listed Services finan financing and leasing of aircraft Etc but then these are again subject to certain eligibility criterias which are like you know make suring that you meet the qualifying activity requirements secondly audit of financial statements third is uh trans surprising rules then there is a Dem minimize rules so if they meet all these criteria yes then they are exempt from tax.

• What is the procedure for registering for corporate tax in the UAE, and what steps should businesses take to ensure a smooth registration process?

Yes, so the steps to register for corporate taxes that the every business should log in to the Mr Tax portal create a new account and submit all the relevant documents such as the trade license copy memorandum and articles of Association uh deciding about their financial year which is as per the memorandum and articles of Association then the passport copy of this of the shareholders or as well as the Emirates ID copy, email ID and contact number so with all this information or I can say you the businessman can just go and register.

• Thank you so much for joining us today. It’s been great hearing your insights on the tax landscape in the UAE. Before we wrap up, would you mind sharing with us about your association with Profound?

Profound provides incorporation company formation services and PRO services and Profound would like to have an extended partner which is Bazar accounting and management advisors where we come in place to support on post licensing services such as accounting and tax compliance services so we see this great business strategy between the two firms to support our customers and to educate our customers not only from an entry point but also in terms of what are the requirements for them in on a long run to do their regular businesses so I see a great partnership between profound and Bazaar Accounting in this regard thank you Aleesha for inviting me and I thank profound for this opportunity thank you so much.

Thank you for joining us on our podcast today. Until next time stay informed, stay inspired, hit subscribe and stay Profound.